iSEE is not your typical digital marketing company. We invent unique concepts based on empirical experiences. Reality means a lot to us, and so does the conscious mind to make things better, not worse.
How to build your Mobile App (or any other product though this method is primarily for mobile Apps)?
Follow the simple 3-step process to identify the following:
1. Core function: define the main human function (need) to satisfy
2. Core segment: Identify the under-served segments (humans)
3. Core features: add the optimal features for the segments to fulfill the function
Then, the market will test your assumptions and make you start the 3-step process over.
After the initial three steps, it would be useful to evaluate the total addressable market (TAM). If you don’t have a large enough TAM for the chosen segment, iterate until you find the right mix that can optimize your profitability. Start with the math not hunches.
What if you don’t satisfy one simple function well? Even if you target a large segment, you won’t break even. This means that on the product development pyramid below, you won’t 'reach' the market (the purple triangle).
If you satisfy the core function very well by finding the perfect features for your core segment, you are likely to reach and dominate the specific market you are targeting. This is how a de facto monopoly, that has satisfied deeply one basic function, would look like.
Examples of monopolies in the EU and North America
What are product functions?
But first things first.
Core product functions? What are they? Here is a non-exclusive list:
• Gamble, etc.
The App should be easy to explain in one or up to three words the most. The main function of the App should be one word. Once this basic human function is identified we proceed to step two, to find an under-served segment or a segment that can be served much better than it is today.
Why one word?
If you have an App that is for both traveling and dating, you would radically limit your market and make your product development journey a mess.
In other words, you will shoot yourself in the leg for no obvious reason. Leave market differentiation for later. Initially, you have to focus on only one core function. As you would see later when companies add features supporting the main function of a preselected segment, market domination is achieved. For instance, if your dating App has the main function ‘dating’, adding a chat feature shouldn’t change the main focus on the key function. It won’t become a communication App all of a sudden! It will still be a dating App.
Now, once we know the function we can proceed to step 2.
How to identify the right market segment?
Is the market for your product function oversaturated? Worry not. Look at the examples below when despite a market-dominant company targeting a key function, another player managed to achieve Unicorn status.
If you want to enter a market with a dominant competitor you have to define your segment and then measure the TAM for your chosen segment. Is the market you can target large enough and are the features you want to add differentiating you enough to create a sustainable business?
Here are the questions to ask:
During the exploration of the TAM, you should be able to identify the underserved segments. How to do that? We will publish another article about this shortly. It’s at this phase when you need to focus on the key features users miss. For now, remember that segments are NEVER companies. Segments are always people who use the product.
For instance, your segments aren't SMEs, but precisely defined executives (levels of seniority, geography, demographics) at SME companies. But we'll discuss this more in the next article.
Below are some examples to inspire your imagination.
Example Skype vs Zoom
Skype is super easy to use and was similar to the desktop version of WhatsApp in its simple interface. With an intuitive approach to its UX design, Skype was made as mainstream as possible. It was thus used for personal communication. Users didn’t see it as a ‘business App’. Because Skype served the B2C markets, specializing in B2B communication required a different product and brand. Microsoft made Skype for Business. However, the features of Skype for Business weren’t adjusted to the business community enough to preserve market domination. Skype left the business segment underserved. It was clear that another business-oriented app would fill the market vacuum by targeting all people in the corporate sector who didn’t feel at home with Skype.
Zoom was developed with corporate users as a clearly defined core segment. The company targeted the same function (communication) of a more precise segment: corporate users. This is how they were able to identify the right features to grow faster. Zoom's structured and logical interface coupled with corporate features (i.e. changing or blurring backgrounds, scheduling meetings, webinars, etc.) resonated well with corporate America. The domain of the App (www.zoom.us) also helped its progress given the influence of the American economy internationally (albeit the founder is a Chinese emigrant). It went deeper than Skype into satisfying the need for communication of its chosen segment.
This is how Skype lost the corporate communication market to Zoom and other players who were more attentive to customer needs and wants.
Example Mobile operators vs WhatsApp/Viber
Because of rigid political limits, mobile operators are unable to provide seamless international communication nor can transfer images and videos without extra charges (MMS).
Clearly, there was a need on the market by B2C users to communicate internationally and send more sophisticated messages than SMS. This market was mostly built atop existing mobile infrastructure severely impacting mobile operators’ profit margins. Mobile chat Apps were the innovation everybody has been waiting for to 'slice up' the marketing pyramid below.
WhatsApp/Viber filled in the market vacuum with its key feature: satisfying a core function with 'free' internet communication. Unlike Skype and other Apps that existed at the time, including Facebook, WhatsApp was syncing naturally with each mobile phone, using the saved personal and business contacts directly from the user while allowing a seamless experience. The Apps were using existing internet connections users were already paying for (Wi-Fi). This is why the Apps were perceived as a free alternative to mobile operators.
Example: Weebly vs Wix
Weebly was the dominant commercial drag-and-drop website SaaS platform that focused on the lower market segments (unlike WordPress aiming the open-source community, Shopify focusing on e-commerce, and Squarespace targeting higher-end markets). At some point, innovation at Weebly was stifled. The product was also limited by old technologies that limit the depth and speed of adding features.
From 2017 to 2020 Wix’s market share rose from 0.6 to 2.3 while Weebly’s saw a relative drop during #COVID19, to 0.5%. Wix was the relative market challenger, and by satisfying the core function better and deeper with core features, it managed to make a dominant product for the same segments.
Example of a product-market misfit: Xtras Health
Segments: Affluent people who want to pay forward health extras. The focus was primarily on people older than 40 years who need health extras.
Features: Starting at a relatively low price, poorly branded, and with features that are clearly focused on price-sensitive market segments, not affluent people.
People who pay things forward are usually affluent and don’t need 'affordable' solutions. Users who would prefer less expensive health extras coverage take credits and pay the health extras after they are needed. There was a product-market misfit. The features of the product didn’t match the segments.
Generally, dominant features for your core segment enable you to surpass the competitors. They can make you the relative market leader.
What can Xtras Health do:
Regardless of the industry, on a high abstract level, only three features matter: price, quality, and branding. Illustrative examples of companies that used one dominant high-level feature to outcompete the incumbents.
Price: Mobile operators MMS vs WhatsApp International calls & videos
Quality: Wix vs Weebly, Mac vs Windows
Branding: Tesla vs Ford, Bottled vs Tap water
How to identify the right high-level features?
As mentioned the features must match the chosen segments with large enough TAM.
Here’s the main hierarchy of features.
Here are the 9 main supporting & medium level features you should take into consideration during your first iteration of the three-step product development process.
Make sure you start with the needs and wants of your targeted segments, not with your personal preferences when defining the initial features.
So, to conclude, what does it take to make a multibillion-dollar App?
And, a large enough TAM.
Do you have the perfect product concept with a clearly defined core function targeting a clearly defined core segment with the right features? Would there be enough TAM to make something amazing? In the next article, we’ll tell you how we calculate the relative TAM.
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